Medicare Advantage is the only place in the entire health care system where health plans specialize … [+]GETTY
Medicare Advantage (MA) is the program under which the elderly and the disabled can enroll in private health plans, similar to the plans many of them were in as employees. The program occupies a genuinely unique place in our health care system.
There are only two places in our health care system where enrollees receive government premium subsidies to choose once a year among competing insurance plans. In the Obamacare exchanges, plans have outrageously high deductibles, unacceptably narrow networks and premiums so high that almost no one was buying insurance in the unsubsidized part of the market until Congress created a temporary bailout last year.
The Medicare Advantage program, by contrast, has enrolled nearly half of all eligible people and has satisfaction rates of 90 percent or higher.
There are good reasons why the MA program works so well.
Medicare Advantage is the only place in the entire health care system where health plans specialize in various chronic conditions and advertise to attract patients with those conditions. By contrast, there is no employer in the entire country that seeks to attract employees who have diabetes, heart disease or cancer. Plans in the Obamacare exchanges also appear to have no interest in high cost enrollees. To the contrary, these plans along with most employer plans seem designed to attract the healthy and avoid the sick.
In the Medicare Advantage program, a doctor who discovers a change in a patient’s medical condition can use that information to get a higher premium payment for that patient. This is one of the reasons why MA plans have a financial self-interest in discovering medical problems and solving them. And that is why Medicare Advantage is the only place in the entire health care system where health plans aggressively compete to solve the problems of people who are sick.
Studies show that MA plans on the whole provide higher quality care at a lower cost than fee-for-service Medicare. For example, one recent study found that MA plans cost $1,704 less per enrollee per year, all other things equal. Interestingly, the highest rated plans are doctor-run and they are not necessarily HMOs. IntegraNet Health in Houston is an example of a doctor-run plan that achieves very high quality scores and pays its physicians fee-for-service.
Seniors can usually enroll in an MA plan for no more than their Part B (outpatient) and Part D (drugs) premiums. That means they avoid almost $2,000 a year for medigap insurance, which other beneficiaries spend to fill the gaps in regular Medicare. They also receive such extra benefits as hearing, vision and dental care that are not available in regular Medicare.
MA plans are also meeting the needs of marginalized populations. Two out of three eligible low-income Americans are in MA plans, along with more than half of all African- Americans and more than 60% of Hispanics.
So, what is the problem? At a recent hearing in the House of Representatives, witnesses had a slew of them. Outside critics have also chimed in. I’ll address these issues one by one.
Do MA plans deny enrollees needed health care?
Critics pointed to a report by the Health and Human Services’ Office of Inspector General (OIG). It found instances where doctors’ requests for prior authorization for a drug or a procedure were denied by MA plans, even though the request was consistent with Medicare’s general rules. Although it did not find an instance of patients being denied needed care, the report raised the specter of that possibility.
However, (1) the study only looked at a handful of prior authorization requests (247 out of a population of 28 million enrollees); (2) of these, 95 percent of the requests were approved; and (3) of the ones that were not approved, only 13 percent (33 cases in all) were questionable.
Here is the problem with the OIG report. A majority of doctors say that from 15% to 30% of care is unnecessary. Prior authorization is used to avoid procedures that are wasteful and even unsafe. Furthermore, almost everyone agrees that our health care system provides too much low-valued care and too little high-valued care. The entire MA system was created in part to address that issue. If MA plans are doing what they are supposed to do, we would expect them to provide fewer of some types of services and more of other types. To evaluate the program accurately, the OIG report needed to compare MA plans with what happens under traditional Medicare. Yet this is the kind of comparison the OIG report did not do.
Are MA plans overcharging the government?
Critics also point to a report by the Medicare Payment Advisory Commission (MedPAC, an independent body that advises Congress). It found that evaluations of patient medical problems (“risk scores”) are higher in MA plans than in traditional Medicare – leading to higher premium payments. Yet this is to be expected. Since MA plans get paid more if the enrollees have more health problems, they have a financial incentive to find and document medical problems. By contrast, a garden variety fee-for-service doctor does not have such incentives and therefore may be less careful in maintaining patient records.
To the extent that high risk scores are a problem, part of the answer is conducting audits and fining health plans that excessively err in patient coding. More drastic action should be taken if actual fraud is involved. It is worth keeping in mind, however, that an estimated $60 billion a year in Medicare spending is lost to fraud – and almost all of that is in regular Medicare, not in MA plans.
Does the government pay too much for MA plans?
A MedPAC study concludes that Medicare pays 4% more than it would have spent had the MA enrollees been in regular Medicare. However, an industry study concludes just the opposite – that Medicare is spending 9% less. George Halvorson, former CEO of Kaiser Permanente, calls the MedPAC study “shoddy,” and notes that MA plans have 35 percent fewer emergency room days, 40 percent fewer hospital days and many more eVisits.
Even MedPAC, by the way, says that MA plans are more cost-effective.
Are MA plans underserving patients who have the most critical conditions? Critics also point to a report by the General Accounting Office (GAO) finding that patients in MA plans are more likely to disenroll and return to regular Medicare in their last year of life. Presumably, this is the point at which patients are the sickest, requiring the costliest care.
However, the disenrollment rate among this group was only 4.6% compared to 1.7% for other enrollees. That means that more than 95% of patients in the last year of life did not return to regular Medicare.
Moreover, there are good reasons why terminally ill patients might disenroll, having nothing to do with the quality of their care. They may choose to enter a hospice, for example, or move to be closer to family.
Yes, some reforms are needed.
The MA program is not perfect. There are a number of needed reforms, including making enrollment continuous. Enrollees should be able to get into the plan that is right for them as soon as their health condition changes, rather than waiting 12 months for an open enrollment period. But this and other reforms would only make a good program better.
I will write more about these changes in the future.
Very good piece
This is a fine article. It is great to see Dr Goodman and Mr Herrick back publishing again.
My only reservation here is that the article takes a bit of a swipe against Obamacare plans. I agree that these plans are truly inferior to MA plans — but a main reason is that Washington gives them a lot less money.
Last time I dug into the number, the average federal subsidy to an Obamacare insured was $4,000 to $6,000 a year at most ages.
The average subsidy to any MA insured is in the $12,000-$13,000 range per year,
If the average Obamacare insurer got $12,000 per person in subsidies, their deductibles would be a lot lower than they are.
I am a senior myself, so I like being spoiled….but let’s not doubt for a minute that I am spoiled.
Thank you for writing this article. Two of the most frustrating issues is
1. Being enrolled in an MA plan and then going back to traditional Medicare in states where you may need to qualify medically if you want to buy a Supplemental plan to fill in the gaps of what traditional A and B doesn’t fully cover. Many people may get rejected by the supplemental carrier if there is a loss of guarantee issue. This simply forces people to remain in an advantage plan or go without the safety net of the supplement.
The federal government does not require all states like NY and a few others to provide this guarantee right.
2. I work with many but not all MA plans bc each carrier requires a broker to take intentesive tests to recertify 1x per year to be allowed to represent the MA and PDP (drug plans). This is very different from the exchanges or as you call it Obamacare. Its rough on advisors and this leaves the masses to make their decisions often via TV commercials.